Could Europe offer after Thanksgiving sales on gold?

The U.S. Comex gold futures rebounded 0.34% in the past two days, ending at $1,729.50 on Thursday. The S&P 500 index went up 0.23% on Wednesday, before the U.S. Thanksgiving holiday. The Euro Stoxx 50 index continued its winning streak on Wednesday and Thursday and surged 4.44% this week. Crude oil has now stabilized around $87 per barrel while the Dollar Index has fallen 0.72% this week to 80.69 on Thursday. Disappointing European economic news contrasts with better news coming out of China. While Germany’s November PMI manufacturing index rose to 46.8 from 46 in October, the Eurozone PMI composite was still stuck at 45.8 in November compared to 45.7 in October. The PMI was last above 50 or in an expansion mode in January this year. The Euro area household confidence index slipped to -26.9 this month from -25.7 in October, reaching a three-and-a-half year low.

During the ongoing EU Summit, the leaders fought over ways to reduce spending in the seven-year EU budget and further delayed the Greek aid talk until Nov. 26. With the 10-year Greek government bond yield falling for 10 consecutive days, market may be expecting an improved deal for Greece. On the positive side, the November China preliminary HSBC manufacturing PMI exceeded 50 at 50.4 compared to 49.5 in October. In the last two quarters, Chinese quarter-on-quarter real GDP growth re-accelerated. Higher Chinese demand should bode well for higher gold demand in the coming months. China is now the world’s largest gold producer and likely the largest gold consumer this year. In 2011, China produced 361 tons of gold while imported 582 tons year-to-date through September. These figures compare to the annual production of gold at around 2,700 tons.

By the way, according to the IMF data, other central banks also continued to add gold reserves in October: Turkey added 17.5 tons, Brazil, 17.2 tons, Kazakhstan, 7.5 tons and Russia, 0.4 tons. Upcoming important data and events will include the conclusion of the EU Summit, the ECB President’s speech at the 22nd European Banking Congress on Nov. 23, the EU’s sign-off on Greek’s aid on Nov. 26 and the October U.S. durable goods order on Nov. 27.